Chug for Growth

Drink and be merry -- it's all for the common good.

The myth of the smug teetotaler is no joke. Many of the most popular theories of economic growth in wealthy countries, dating back to the Protestant work ethic of Max Weber, emphasize the abstemious and sober virtues of the well-to-do. And from the 18th-century Gin Acts in Britain to Prohibition in 1920s America to a certain class of modern-day economists, there’s a long tradition of blaming intemperance for the persistence of poverty.

But in fact, mounting evidence suggests that beer in particular, and the beer industry that surrounds it, may be as good for growth as excess sobriety. In some of the world’s toughest investment climates, beer companies today are building factories, creating jobs, and providing vital public services, all in the pursuit of new customers for a pint. It’s the brewery as economic stimulus: a formula even a frat boy could love.

In a time of unprecedented global prosperity, there are an ever-growing number of beer guzzlers worldwide. Liesbeth Colen and Johan Swinnen of the University of Leuven report that beer consumption in China in 1980 was minimal. By 2005, however, the country consumed more than 40 billion liters per year. In 1961, Brazilians drank 630 million liters of beer; in 2007 that number was 7.5 billion liters.

And it isn’t just those in booming economies: Even the poorest of the poor will spend money on alcohol. Abhijit Banerjee and Esther Duflo of MIT have shown that people living on a dollar a day or less can spend 6 cents or more of that on alcohol and tobacco. Add those pennies up and you get a potential market worth billions of dollars a year. Robust demand in even the poorest places is one reason that breweries invest where other industries fear to tread. In just the last few months, Heineken won a bid for two state-owned breweries in Ethiopia for $163 million; Rwanda’s stock exchange recorded its first-ever initial public offering that involved a local brewery; and SABMiller dropped an additional $15 million on top of an initial $37 million investment in its breweryoperation in Juba, the main city in the aspiring breakaway country of Southern Sudan.

These investments aren’t just good for Big Beer. In Juba, SABMiller’s brewery will provide tax revenue, lease payments, more than 200 local jobs, and increased demand for local agricultural produce. In more stable markets, breweries can be a considerable economic force. In 2005, East African Breweries was the first company in Kenya to reach $1 billion in market capitalization, and the company paid about $44 million in corporate income tax last year.

Of course, when it comes to booze, you can have too much of a good thing. The World Health Organization has estimated that as many as 76 million people suffer from alcohol disorders and that alcohol is a causal factor in 20 to 50 percent of all cases of liver cancer, homicide, epileptic seizures, and motor-vehicle accidents worldwide. And one has to wonder about the choices of those living on a dollar a day in rural Mexico who are spending more on alcohol and tobacco than on education, or South Africans, who spend more than three times as much on those private vices as on education and health care combined.

But the dangers of excess are much lower in poor countries like Zambia (average beer consumption: 5 liters a year) than in rich countries like the United States (more than 80 liters per year). And those risks need to be balanced by beer’s potential to bring about improvements in the quality of life, if only by providing taxes and employment income.

Indeed, beer may have been a force for growth for a long time. Colen and Swinnen note that beer consumption is higher in Protestant countries. What if the early success of Protestant-dominated economies wasn’t about Weber’s famed work ethic at all, but about the impact of breweries? Of course, it may be just as outlandish to argue that progress is driven by hops and barley as by the fear of eternal damnation — but at least it’s more fun to discuss over a pint.